I Congressional Budget Office (CBO) released a new report estimating the Social Security benefit payment schedule, saying the Old-Ages and Survivors Insurance (OASI) Fund will “drop to zero” in fiscal year 2034 and the Disability Insurance (DI) Trust Fund will do the same in 2064.
The report is based on testimony provided by Molly Dahl, CBO’s longtime chief analyst, before US Senate budget committee.
This is usually in line with previous predictions, but some exhaustion times in recent years have been floated between 2034 and 2035. The CBO added that “starting in ten years, Social Security’s income will not be enough to cover all the benefits that must be paid under current law. ,” according to the report.
Social Security payments are often the primary source of income for retirees who no longer collect a regular paycheck from work. Beneficiaries are eligible for benefits from age 62, but these benefits are much lower for those who choose not to wait until age 67 or 70.
CBO offers two suggestions for extending the payment timeline in its forecast. One could increase the Social Security tax rate “immediately and permanently” by 35% – from the current rate of 12.4% of taxable income to 16.7%. Another will reduce benefits by 24%.
“Alternatively, Social Security funds could be strengthened through a combination of tax and benefit changes or by transferring money from the Treasury’s general fund to trust funds,” the report said.
Uncertainty about the country’s economic and demographic trends adds to broader uncertainty about Social Security’s long-term prospects.
“For example, if the economy grows faster than CBO projects, annual income for trust funds will be larger, and changes in taxes or spending that would be required to pay benefits as planned under current law by 2098 will be smaller,” CBO said. “If, instead, the economy grows slower than expected, the income will be smaller, and the necessary changes will be larger.”
CBO projects Social Security health 75 years into the future by using “a detailed microsimulation model that starts with data about people from a representative sample of the population and simulates the statistical and economic effects of that sample over time,” the office explained.
A few months ago, i Social Security Administration The SSA’s board of trustees has predicted that the fund will last a year longer than previously predicted, ending in 2035. The CBO determines that figure for its figure in one year, but both will need to be considered House of Representatives and the Senate to find a higher goal of tangible reform over the line of repeal.
The issue of Social Security reform is one that highlights the biggest disagreement between the two major political parties, and the thin balance of power between them in both houses of Congress has made any meaningful progress difficult.
Despite political pressure to act and lawmakers failing to agree, the most recent attempt to address the program’s challenges came from a bill supported by Democrats and independents in the House and Senate.
The proposal would increase monthly benefits and require the SSA to use a different formula to calculate inflation. It currently uses last year’s Consumer Price Index for Urban Wage (CPI-W). Since Social Security benefits have not kept pace with the rising cost of living for most seniors living on fixed incomes, lawmakers have argued that this calculation formula should be changed.
“The Consumer Price Index for Americans 62 and Older (CPI-E) is another price index that more closely reflects the actual costs experienced by seniors; for example, within the CPI-E, medical expenses are weighted more heavily than in the CPI-W,” said a fact sheet on the proposal.
Both the House and Senate versions of the bill are stalled in committee this year and currently have no Republican co-sponsors.
Both candidates in this year’s presidential election have vowed to preserve the Social Security system. The Republican Party’s 2024 platform vows to “restore economic stability to ensure the long-term sustainability of Social Security” without cuts, or changes to the retirement age. It does not include any policy explanations of how to achieve this.
On the Democratic side, the 2024 platform says the party will honor its “ironclad commitment to protect Social Security, Medicare, and Medicaid. We reject any efforts to privatize Social Security or reduce any benefits earned by the American people,” saying it would strengthen the trust fund by increasing taxes on wealthy Americans.
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